Timonium Condo FHA Approval

At the end of 2009, HUD changed its’ condo approval process for FHA condo financing.

No longer can a community be given a “spot” approval when a unit goes under contract if a buyer desires to use FHA financing.

Condominium developments must be approved in advance of an FHA sale and the approval is only for a certain amount of time.

Many Timonium condo buildings have been approved already.

Luckily HUD has set up a website to check whether a condo development has been HRAP or DELRAP approved.

I entered the Timonium zip code 21093 to see all approved units. You can do this for any zip code if you are unsure of the condo development’s name!

Contact me if you are considering selling or buying a Timonium condo. I can help you navigate these tough waters!

New FHA Changes May Be Coming Soon

New FHA changes may be coming soon as HUD asks for consumer input on three issues that would affect borrowers.

I wrote about these possible changes in January, in my post “More FHA Changes to Happen Mid Summer.” Also in January, HUD made major changes in FHA fees and upfront mortgage premiums. These changes are to keep the FHA afloat to be able to continue to insure mortgages.

HUD released a letter Thursday asking for public comment, and posted the three questions for comment in the next 30 days on their website:

Question 1:

Update the combination of credit and down payment requirements for new borrowers. New borrowers seeking FHA-insured financing will be required to have a minimum FICO score of 580 to qualify for FHA’s flagship 3.5 percent down payment program. New borrowers with credit scores of less than a 580 will be required to make a cash investment of at least 10 percent. Borrowers with credit scores of less than 500 will no longer qualify for an FHA-insured mortgage.

Essentially, if you have a low credit score, you would need to put 10% down rather than the usual 3.5% FHA financing minimum downpayment. This appears to be due to the large number of lower credit score borrowers defaulting on their FHA insured mortgages. The higher downpayment would give FHA more to work with should they need to foreclose on the FHA mortgaged home.

The good news is that the originally proposed increase for all FHA borrowers to 5% is not one of the questions posed.

Question 2:

Reduce allowable seller concessions from six to three percent. Allowing sellers to contribute up to six percent of the home’s sales price to offset a buyer’s costs exposes the FHA to excess risk by potentially driving up the cost of the home beyond its appraised value. Reducing seller concessions to three percent will bring FHA into conformity with industry standards.

This is the one that many of my clients in the past would have had issues with. Maryland closing costs are very high, and many borrowers need approximately 4-5% to cover the additional closing costs in addition to downpayment. This could really cause a big problem with Maryland FHA borrowers.

Question 3:

Tighten underwriting standards for manually underwritten loans. When using compensating factors in the underwriting process, lenders will be required to consider those factors which are the best predictive indicators of loan performance, such as the borrower’s credit history, loan-to-value (LTV) percentage, debt-to income ratio, and cash reserves.

This one would be the easiest change, because loans that must be manually underwritten tend to have big reasons that the digital systems would not allow them to go through.

What are your thoughts on the proposed changes?

Would any of these FHA changes prevent people you know from buying a home? It is very likely!

The one that concerns me the most is #2. The high Maryland real estate transfer tax rates are already an issue, and without a seller concession to help with the majority of the closing costs could make homeownership for many an impossibility.

Contact me today to take advantage of the FHA loan guidelines as they stand now, before any of these proposed changes may go into effect.

This Month in Real Estate July 2010

This Month in Real Estate July 2010 is here!

May’s sales across the United States were down 2.2% from April, but May closings were up 19.2% from May 2009. I am certain much of this is due to the extended homebuyer tax credit and buyers working to ensure they close long before the settlement deadline of June 30.

Though the tax credit is gone, interest rates are low, and housing prices are also low. Buyers can take advantage of these lows and possibly use an FHA to buy a home — and some may be eligible to have most of their closing costs paid for by the seller if they are able, or have some of their costs rolled into the loan, so those lucky buyers may only need about 3.5% (the downpayment minimum) out of pocket to get into a new home.

There are other FHA loans available as well, including some to get your home more energy efficient, FHA203K rehab loans to rebuild a fixer upper, and other FHA loan programs to assist in better homeownership.

For more information about Baltimore FHA home financing, please contact me today.

FHA Approves Electronic Signature

On April 8, 2010, FHA sent out a mortgagee letter stating that the FHA approves electronic signatures on documents, including contracts.

This is wonderful news, as I have recently begun to use Docusign electronic signatures for the convenience of my clients.

I also wanted to use this to prevent the use of paper as much as possible, since contracts can be anywhere from 35-50 pages, and often times many copies are made, wasting so much.

Here is a copy of the mortgagee letter from the US Department of Housing and Urban Development.

In speaking with T Jeremy Loomis, my mortgage partner, he stated that Wells Fargo’s policy is that the settlement papers must be done “wet” — actually signed in person with ink.

This is very exciting that FHA is trying to help make the contract process easier and more environmentally friendly.

Since implementing electronic signatures through Docusign for my Towson real estate clients, it has made things so much more efficient and “green”, and my clients have enjoyed the ease of contract completions!

FHA Mortgage Insurance Premium Goes Up April 5, 2010

Besides the tax credit deadline looming on April 30, another significant deadline is even closer — beginning April 5, 2010, the FHA Up Front Mortgage Insurance Premium is going from 1.75% up to 2.25%. April 5, 2010 is NEXT MONDAY!

I wrote about the rise in FHA Upfront Mortgage Insurance Premium on January 21, and time is now running out to get under contract before this change happens.

For any case numbers originating on or after April 5, the MIP will be 2.25%. This Friday, April 2, 2010 is Good Friday, so banks are closed.

This means for buyers to get the 1.75% premium, they need to be under contract and have all of their paperwork to their mortgage professional by Thursday, April 1, 2010 at the latest. (No joke!)

An example of what this means is that for a $200,000 loan amount, the current up front mortgage insurance premium to use FHA would be $3,500. As of next Monday, for the same loan it would be $4,500, costing a buyer $1,000 more.

Down the road, there are also expectations of reduced seller concessions and higher downpayment requirements for FHA borrowers. This means to buyers who are considering using FHA to obtain their loan should hurry to get the benefits as they stand currently!

Nine Weeks Left in Homebuyer Tax Credit Extension — Will It Be Extended Again?

A discussion I have been involved with here in the Baltimore area about the crippling snow and the effect on the Baltimore real estate market has people in the real estate world wondering if the homebuyer tax credit may be extended again.

On Monday, the Wall Street Journal wrote an article about the credit, and how lobbyists are gearing up to try to have it extended.

In the northeast, the sheer fact of houses not being able to be shown for the majority of a month due to the snow is a big part of the issue.

Other areas of the country make the point, as recounted in the Wall Street Journal article, that banks often are often taking a long time to approve short sales. I personally have found that this delay creates the issue of buyers who qualify for the credit not considering these homes as options.

It will be interesting to see if it will happen. Washington stated that it would not be extended further, and I can understand if that does not happen. Without the urgency of it ending, the credit cannot do its’ job, which is to help people get into homes.

The other looming deadline we have right now is the upfront Mortgage Insurance Premium for FHA loans, and the fact that that rate is going up from 1.75% to 2.25% for loans whose case numbers are assigned after April 5, 2010. This means that buyers desiring to use FHA financing should be pushing to have a home under contract by the third week in March, giving them about three weeks from now, to ensure their case number is assigned prior to April 5, 2010.

Two very important deadlines are looming, and I will be following how the Baltimore real estate market responds to them.

Baltimore Real Estate Market Third Week of February 2010

As we enter the fourth and final week of February, I am reminded as to where the market was last year at this time versus this year.

I have seen showings become more frequent in the past week and the excitement over spring’s arrival in the next few weeks definitely brings people out to look.

The snow storms we had this month really put a halt to the market, as some homes were inaccessible (all of them for a long period of time) until just recently.

February is not notoriously a great time to sell your house. Often times people wait “until spring” to make sure the snow is over and the buyers are out looking.

This year we have the First Time Homebuyer Tax Credit end looming, and sellers are taking notice and attempting to get their homes on the market. The other driving force we have right now is the April 5, 2010 deadline for FHA to avoid the higher up front mortgage insurance premium.

It appears that tomorrow we will have heavy rains which should melt a lot of snow, and may cause some flooding. These are issues that sellers most likely usually don’t have to handle, and buyers need to be aware that these are highly unusual circumstances.

Many gutters have fallen, and one of my clients, who is making a claim on his gutter system said that his insurance company told him they are declaring the Baltimore area a “disaster area”. This means that roofers are overwhelmed and not available, which means this rain tomorrow and possible snow Thursday could be big problems for many Baltimore homeowners who no longer have their usual defense against water coming into their basements and main levels on their homes.

Sellers have to be aware of what is happening, and be prepared. Buyers need to be understanding and patient, and realize that these homes most likely do not usually let the elements enter!

Hopefully March will bring us much needed warmer weather so Baltimore homebuyers can get out and take advantage of these credits and lower upfront PMI, and sellers can have their homes returned to their usual states.

More FHA Changes to Happen Mid Summer

On January 20, I wrote about the new likely major FHA loan changes that were being announced.

One of those changes is going into effect on April 5, 2010, as I wrote on January 21, with the upfront mortgage insurance premium being raised from 1.75% to 2.25%.

A press release was placed on the hud.gov site on January 20 about the new changes, but was not widely distributed.

It does reiterate that the downpayment will still remain at 3.5%, which is a big relief for homebuyers wishing to use FHA insured loans to buy their homes. It had been proposed that the downpayment be raised to 5% of the sales price of a home.

The major component that FHA homebuyers need to be aware of is that sellers will only be allowed to give 3% in closing cost help to a buyer, rather than the 6% they are currently allowed to give.

From the hud.gov website:

Reduce allowable seller concessions from 6% to 3%

• The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.

• This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

This may take a buyer from being able to buy a home to not being able to afford the closing costs associated with purchasing one.

In 2009, I saw many contracts with 4% in seller concessions, because closing costs in Maryland are fairly high. The minimum in closing costs for buyers is the 3.5% downpayment, plus an additional 4-5% in transfer taxes and costs. What many buyers have been doing is making an offer and asking for help from the seller to cover the majority of that 4-5%. This will no longer be the case, making many buyers possibly short 1-2% to close.

What this means for buyers who wish to use FHA insured financing is that they need to move quickly to avoid the higher upfront PMI and be able to take advantage of the possibility of between 4-6% in closing cost help from sellers who are willing to do so.

Contact me today to get your financing in place with a qualified FHA approved lender so you can take advantage of the FHA regulations as they currently stand!

HUD Temporarily Waives FHA 90 Day Policy to Move Foreclosed Homes

In an attempt to move foreclosed properties more quickly, HUD has temporarily waived the 90-day ownership guideline, making these foreclosed properties available to FHA homebuyers.

RISMedia reports that:

In today’s market, FHA research finds that acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

This comes just before FHA’s announcement of their likely fee hike coming down the pike, helping to soften the blow of the new regulations & fees.

Buyers who have been considering foreclosed properties but could not use FHA insured financing can now, which is great news. Hopefully many of these qualifying buyers will get in to these homes with this change before the first FHA fees go up on April 5, 2010.

First New FHA Mortgage Insurance Premium Change to Happen April 5, 2010

Yesterday, I wrote about the major FHA fee changes that could be coming up.

Today, the mortgagee letter went out to FHA approved banks, stating that the upfront mortgage insurance premiums collected will be 2.25% instead of the 1.75% they are now. I would like thank Michael Johnston from Carrollton Mortgage Services, Inc. for sharing the mortgagee letter with me.

The closing costs assistance I discussed yesterday is not addressed in this letter, so I do not know when that may come into play.

This change in the MIP goes into effect for any FHA loans for which the case number is assigned on or after April 5, 2010.

So if you are a qualifying buyer for an FHA loan and want a lower up front mortgage insurance premium of 1.75%, you need to get under contract very soon!

 

To reach Michael Johnston, Assistant Vice President, Carrollton Mortgage Services, Inc.,  E-mail: mjohnston@carrolltonbank.com , Office: 410-561-8477 X 106, Cell: 410-627-1921

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